…S&P Warns
Ratings agency Standard & Poor’s (S&P) has cautioned that Ghana’s economy, while showing signs of stabilization, remains exposed to external shocks, fiscal slippages, and exchange rate risks that could undermine the country’s recovery efforts.
The warning comes alongside an upgrade of Ghana’s sovereign credit rating to B-/B with a stable outlook, reflecting what S&P described as “improved fiscal performance and a better balance of payments position.”
“In our view, notwithstanding stronger recent economic outturns, Ghana’s economy remains exposed to risks from commodity price fluctuations and broader external and weather-related shocks,” S&P said in its latest report.
Election-Year Fiscal Risks
The agency expressed concern about the durability of Ghana’s fiscal reforms, noting that the country’s economic discipline often weakens during election cycles.
“We are worried, especially during future election cycles, which in the past have coincided with large increases in public spending in Ghana,” S&P stated.
The report recalled that election-year overspending was a major factor behind Ghana’s recurrent fiscal crises and eventual sovereign debt default in December 2022, when the country suspended payments on its external debt.
Exchange Rate Exposure
S&P further warned that exchange rate volatility remains a key risk to fiscal stability.
More than half of Ghana’s public debt is denominated in foreign currency, meaning fluctuations in the cedi directly affect the country’s debt-to-GDP ratio.
“Over 50% of public debt is denominated in foreign currency, and exchange rate movements have a material impact on Ghana’s debt ratios,” the agency emphasized.
Although the cedi has strengthened significantly in 2025 — appreciating from ₵14.6 to about ₵10.9 per dollar — S&P warned that the currency remains vulnerable to external shocks, particularly from commodity exports such as gold, cocoa, and oil.
Improved Growth and Inflation Outlook
Despite these challenges, S&P revised Ghana’s economic growth forecast upward, from 4.5% in May to 6.0%, citing strong performance in commodity exports and government efforts to stabilize the macroeconomic environment.
The agency noted improvements in the balance of payments, fiscal management, and monetary policy credibility, with inflation declining steadily from 23% in late 2024 to single digits this year.
S&P expects inflation to fall below 10% by 2026 and remain within the Bank of Ghana’s target band of 6–10% through 2028.
“We think inflationary pressures will remain lower compared with those in recent years as the credibility and effectiveness of monetary policy are improving following years of sizable fiscal deficit financing,” the report said.
Ghana’s latest credit rating upgrade marks a cautious return to market confidence after a tumultuous three-year period of economic distress.
In 2022, the country defaulted on its external debt, becoming the first African nation to do so in that year. The crisis triggered a severe currency depreciation, inflation above 50%, and mass protests over the cost of living.
Following the IMF’s $3 billion bailout programme launched in 2023, Ghana embarked on a painful restructuring of its domestic and external debts. The successful completion of the first IMF review in 2024 helped restore some investor confidence, while strong gold exports and declining import bills have further improved reserves.
However, S&P cautioned that Ghana’s recovery is “nascent and vulnerable”, particularly if global commodity prices fall or if fiscal discipline weakens ahead of the 2026 elections.
Analysts Urge Sustained Discipline
Economists have described the S&P report as both a vote of confidence and a warning shot.
According to Dr. Theophilus Annan, a financial analyst with the University of Cape Coast, “Ghana is getting credit for progress made under the IMF programme, but S&P is reminding us that the real test is yet to come — especially when the political cycle heats up.”
He added that maintaining exchange rate stability and preventing election-year overspending would be key to protecting Ghana’s gains.
Outlook
While Ghana’s near-term prospects appear brighter, S&P concluded that anchoring inflation expectations and preserving fiscal discipline will determine whether the current stability can endure.
“Anchoring inflation expectations will depend largely on exchange rate stability, which has been volatile in recent years,” the agency stated.
With two years to the next general elections, observers say the coming months will test not just Ghana’s economic reforms but also the political will to sustain them.
